Tuesday, May 26, 2009

Wall Street Breakfast: Must-Know News

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Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • GM gets union concessions. The Canadian Auto Workers union ratified a cost-saving labor agreement with General Motors (GM) yesterday to protect jobs in the likely event of a June 1 bankruptcy filing. The deal freezes pension payments through 2015 and pays new hires less. The United Auto Workers union is working on its own labor package, with votes scheduled to begin this week. With a bankruptcy 'probable,' and likely to be the most complicated bankruptcy case in U.S. corporate history, GM is rushing to get labor contracts amended so that a court-managed bankruptcy restructuring can proceed quickly. Shares +2.1% premarket (7:00 ET).
  • Opel decision imminent. German officials will try to reach a decision on the three bids for GM's (GM) Opel unit by tomorrow. A government spokesman said talks with all three suitors are ongoing and the bids are still being improved. Magna International (MGA) appears to be the frontrunner, followed by Fiat, though earlier in the week Germany's economy minister said all three bids have shortcomings that might make a bankruptcy filing the best option.
  • Chrysler faces pockets of resistance. Chrysler slammed the Indiana State Treasury for making demands that would force the automaker into liquidation, resulting in the loss of over 4,000 jobs and 9,000 retiree pensions in Indiana alone. The Indiana State Treasury had objected to Chrysler's plans to quickly sell itself in bankruptcy, and filed court papers requesting an examiner be appointed to review Chrysler's business decisions and that the company be placed in the hands of a Chapter 11 trustee. Chrysler is also facing resistance from dealers opposed to closure plans.
  • Lehman bankruptcy causes rift. Lehman's bankruptcy is causing a standoff between its U.S. and U.K. units. Administrators for Lehman's U.S. operations plan to ask a federal judge to approve an international framework for coordinating bankruptcy proceedings among global subsidiaries. Administrators for Lehman's unit in the U.K. argue they're bound by local rules and the interests of their own creditors. The standoff is significant because Lehman's U.K. unit held about a third of the firm's $630B in assets before it filed for bankruptcy and also has data essential to the bankruptcy proceedings at other smaller European subsidiaries.
  • DoJ focuses on bribery. The Department of Justice is stepping up its prosecutions of alleged acts of foreign bribery by U.S. corporations. At least 120 firms are under investigation, including Sun Microsystems (JAVA) and Royal Dutch Shell (RDS.A), forcing companies to mount costly defenses. In some cases, companies have even called the Justice Department and come clean in an effort to secure leniency.
  • Firms talk major phone merger. South African phone carrier MTN Group and India's Bharti Airtel revived merger talks to create a $61B telecoms giant spanning Africa, Asia and the Middle East. Previous talks fell apart last year after the companies failed to reach an agreement on who would control the massive corporation.
  • Rio's evolving deal. Rio Tinto (RTP) said its $19.5B investment deal with Chinalco (ACH) is still 'evolving' and subject to shareholder consideration. Rio chairman Jan du Plessis will spend the week speaking to shareholders in Australia, after meeting with major U.K. investors over the past two weeks. Separately, Rio agreed to a 33% cut in iron-ore prices with Nippon Steel Corp., calling it a 'realistic outcome for both parties.'
  • Nokia launches App Store rival. Nokia (NOK) began rolling out Ovi Store, its online content and software store built to compete with Apple's (AAPL) App Store. The store will launch globally this week. Despite the massive popularity of App Store, analysts expect competitors to struggle to match Apple's success because of technical issues, a lack of applications and increased competition.
  • HP battery recall. Hewlett-Packard (HPQ) is recalling 15,000 laptop batteries distributed in China because of a danger they could overheat and pose a fire hazard.
  • German GDP drops. Germany confirmed its Q1 GDP shrank 3.8% vs. the previous quarter, the sharpest decline since records began in 1970. GDP declined 6.9% from Q1 2008. Economists expect a milder Q2 contraction before GDP stabilizes in the second half of the year.
  • Aussies end short-sale ban. Australia's securities regulator lifted an eight-month ban on covered short-selling of financial stocks as the global financial system showed signs of stabilization. Regulators cautioned the rule will be reinstated if trading activity threatens sector stability.

Earnings: Tuesday Before Open

  • Canadian Solar (CSIQ): Q1 EPS of -$0.10 beats by $0.16. Revenue of $49.5M (-71.1%) vs. $54M. (PR)

Today's Markets

Asia stocks moved lower Tuesday, reversing much of Monday's gains. In Europe, stocks gapped down at the open and are near the day's lows.

  • Asia: Nikkei -0.39% to 9,311. Hang Seng -0.76% to 16,992. Shanghai -0.82% to 2,589. BSE -2.33% to 13,589.
  • Europe at midday: London -1.5%. Paris -.7%. Frankfurt -2.3%.
  • Futures: Dow -1.1% to 8212. S&P -1.3% to 878.50. Nasdaq -1.4%. July crude -2.2% to $59.84. Gold -1.5% to $943.80. Euro -1% vs. dollar. Yen -0.2%. Pound -0.6%.

Tuesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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